3 Multifamily Market Trends Expected to Continue in 2016 (and Why!)

The multi-family rental market has performed very strongly in the years since the financial crisis. Rents have increased steadily, high demand has kept vacancies low, and job growth has created new markets for multi-family housing. The experts are predicting that these 3 multifamily market trends will continue. We’ll look at the what and why of these predictions below.

Rising Rents

Rents grew at a rate of5.9% nationwidein 2014, and we saw an increase of as much as 9% in some areas of the country this year, particularly in secondary markets like Denver, San Francisco, and Portland. The weakest growth is expected in Demand for units continues high in most markets, so the outlook is for continued rent growth going forward.

One factor driving this demand is the dominance of the millennial generation, which now makes up over 30% of the U.S. population. The tighter lending restrictions put in place after 2008, as well as their demonstrated preference for renting over home ownership influences the millennials’ housing choices. This generation values the convenience and amenities of apartment life, and they hesitate to make the commitment required to buy a home. Additionally, many millennials are working to pay off student debt, so taking on a mortgage does not make sense for them. As a result therate of homeownershipfor Americans 35 and younger is at a historically low point: just over 36%.

New Development

Development and construction is also directly affected by demand, and despite the fact that construction is brisk, the inventory is still not meeting demand in most markets. The cities where increased inventory does have the potential to slow rent growth in the coming year include Charlotte, Albuquerque, and Los Angeles.

Multi-family development has beenmost activein Phoenix, Dallas, Miami, Atlanta, and Charlotte. This will likely shift in 2016, with those places nearing optimum inventory dropping off while others, like South Florida, Seattle, and suburban Atlanta, surge ahead.

Growth in Tech-friendly Cities

The demand for new and existing multi-family units will be highest in the places where strong job growth is attracting new residents. Moving into 2016, the employment sector with the highest growth will continue to be in the technology fields. Tech-friendly cities like San Francisco, Seattle, and places like Denver and Austin will continue to attract a substantial number of well-paid workers likely to rent their homes. The Research Triangle around Raleigh NC is another area of strong job growth in the tech sector, as is Houston, which remains one of the country’s fastest-growing cities.

Tech-heavy towns will also continue to see thetrendtoward living and working in urban centers, as opposed to less densely populated suburbs. This will encourage further activity in the area of repurposing existing buildings in the city center, which is popular due to cost savings as well as the appeal of older buildings with character.

Overall, optimisticpredictionsfor multi-family seem to be holding true, and the good times will likely continue in 2016.

REscour was founded by CEO Jake Edens and CTO Chris Lexmond with the intention of helping CRE professionals make better, data-driven decisions. REscour seeks to answer questions about the commercial real estate market before they’re asked by aggregating and analyzing massive amounts of data such as listings, news, and transactions. REscour's main goal is simple: supply quality market intelligence to CRE professionals and provide more insights than ever before.

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